In the last month, eight additional trucking companies have declared bankruptcy, while two others have shut down. This trend is exacerbated by stricter lending standards, which are extending the industry’s downturn.
These companies have filed for Chapter 11 since early July, as detailed in documents from the U.S. Bankruptcy Court obtained by Equipment Finance News:
Daniel Trucking International filed on July 7 in the Northern District of Illinois;
Division 2 Truck Co. filed on July 16 in the District of Minnesota;
Indian Creek Express filed on July 28 in the District of Colorado;
JAM Trucking filed on August 1 in the Southern District of West Virginia;
Lynda Transportation filed on July 9 in the Northern District of Illinois;
ODM Truck filed on July 16 in the Middle District of Florida;
TJ Trucking Enterprises filed on July 11 in the Northern District of Ohio; and
Wendover Transportation filed on July 14 in the Southern District of Texas.
In total, nine freight companies have filed for Chapter 11 so far in the third quarter. This comes after at least 20 filings in Q2.
M&T Bank is among the equipment lenders significantly impacted, highlighted by the Daniel Trucking filing, which indicated over $400,000 in unsecured claims for 47 trucks. Similarly, both Mack Financial Services and Volvo Financial Services are owed more than $100,000 in relation to the TJ Trucking case.
Strained Lending Amplifies Industry Challenges
Despite some signs of recovery over the past year, the trucking sector is still wrestling with a freight recession that has lasted over two years. Uncertainties around trade policies and engine emissions regulations add to the challenges, according to Rush Enterprises Chairman and CEO W.M. “Rusty” Rush during a July 30 earnings call.
Challenges persist as credit standards tighten in the transportation equipment sector. Eduardo Cruz, president of Commercial Equipment Financing, noted that while opportunities for truck financing exist, more lenders, particularly banks, are beginning to withdraw from the market.
For example, Midland States Bancorp has tightened its underwriting standards in its equipment finance portfolios, aiming to reduce exposure to higher-risk profiles. The company attributed $3.9 million in equipment finance charge-offs in Q2 to “credit issues” within the trucking industry.
The retreat of lenders from the transportation industry, while justified, has led to a reluctance to seize and liquidate more equipment. This hesitation means many struggling fleets and owner-operators continue to operate at or below break-even levels, delaying necessary market corrections and keeping pressure on freight rates.
As a result, overcapacity remains in the market; many banks have not yet managed their losses on assets held by failing carriers. This situation allows “zombie carriers” to remain operational, which undermines freight rates and presents challenges for the overall market.
